Wednesday 23 January 2019

How Chinese phone giant may 'double Apple value'

Lei Jun, chairman and chief executive officer of Xiaomi Corp
Lei Jun, chairman and chief executive officer of Xiaomi Corp

Bei Hu and Crystal Tse

Chinese serial entrepreneur Lei Jun has been compared with Steve Jobs, and now analysts are saying the smartphone giant he built could be twice as expensive as Apple.

Xiaomi deserves to trade at a premium to global phone brands due to its market-share gains and faster growth trajectory, according to research from Morgan Stanley, one of the banks leading its Hong Kong IPO.

The Beijing-based company has a fair value of about $65bn to $85bn (€55bn to €72bn), translating to around 27 times to 34 times forecasts for its 2019 adjusted earnings, Morgan Stanley wrote in a report this week, which is roughly double Apple's valuation of 14.5 times estimated 2019 adjusted earnings.

Xiaomi should also fetch richer multiples than rival smart hardware makers like Fitbit and GoPro, as well as some major Chinese internet firms, said Morgan Stanley.

Its success is based on offering "world-class products" at low prices while selling high-margin services, according to CLSA. Adjusted earnings before interest and taxes at Xiaomi could hit $4.5bn (€3.8bn) by 2020, it estimates. (Bloomberg)

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